International Strategic Management - Case Study Example

International Strategic Management Name Course Lecturer Date Table of Contents Table of Contents 2 1.0 Strategic Formulation Process of Ford 4 2.0 Global strategies development 4 3.0 Internal Analysis 6 3.1 SWOT analysis 6 3.1.1 Strengths 6 3.1.2 Weakness 6 3.1.3 Opportunities 6 3.1.4 Threats 7 4.0 Porters 5 forces 7 4.1 Threat of new competition 7 4.2 Threat of substitute products 7 4.3 Bargaining power of consumer 8 4.4 Bargaining power of the supply 8 4.5 Competitive rivalry 8 5.0 Resources 8 6.0 Capabilities 9 7.0 Competence 9 8.0 Yip’s Globalization Drivers 9 8.1 Market globalization needs 9 8.2 Cost Globalization drivers 10 8.3 Government globalization drivers 10 9.0 Culture differences 11 10.0 Cost management 11 11.0 Value chain analysis 12 11.1 Primary activities 12 11. 2 Secondary activities 12 12.0 CAGE Analysis 12 12.1 Culture 12 12.2 Administration 13 12.3 Geographical 13 12.4 Economic 13 References 14 1.0 Strategic Formulation Process of Ford The grand new world car strategy exhibited grand design of it strategic formulation process. In this project, the company exhibit targets that include vitalization and reorganization of bureaucratic organization, an increase in effectiveness by global integration of design, production and auto R&D, active entrance to new markets and strengthening the already established markets and global advancing in R&D while cutting the cost while improving quality through suppliers integration. In this global strategy, the company has integrated the R&D center globally. In addition, it has introduces five Vehicle Centers (Dunning 2009). The development center for the large and mid-size commercial and luxury automobiles are at Dearborn headquarters while the small cars are concentrated at Dagenham, both in the United Kingdom. Indeed, the integration of R&D will reduce the number of human hour needed in product development (OECD 2005). As a result of this strategy, the company will be in a position to globally unify the basic components and platforms that will be made and sold in Latin America, Europe, North America and Asia. By pursuing the formulated strategy, the world car is likely to be realized. 2.0 Global strategies development Due to external business environment factors such as rise in gasoline prices, sever competition from the Japanese vehicle manufacturers, a decline in the SUVs sales and other factors like shift in customer preferences, rise in healthcare costs and pension, the company has been losing in the market (Wolfe 2009). As such, the company has realized the need to do more than grow globally. The company plans to take advantage of the emerging middle class globally and the dynamic growth of markets in China, India, Russia and Brazil. `One of the strategies is to open up new assembly plants in Asia Pacific and merge with major automobile manufacturers in various countries. This is significant to the company as it will be able to achieve cheaper labor than in America and Euro zone which will help in reducing operation costs. An integrated manufacturing facility in Sanand in India, for instance, represents an investment of about $ 1 billion. In Russia, the companies together with Sollers PJSV have launched a 5050 joint venture. This venture received a long term financing of approximately $ 1.4 billion. Under this venture, one of the Ford products, Ford Transit will be made by FordSollers (Ford 2008 Annual Report). On products, Ford has laid strategies that will ensure a continuation of world-class global products that reflect a leading pace of excellent products that are introduced to the market with an efficiency of benchmarking. To meet the needs in Africa, South America and Asia Pacific, Ford is rolling out a sport utility EcoSport and Ranger pickup. The new automobiles are fine tuned to these regions and indeed reinforce the commitment of the company to offer balanced global products. Product satisfaction is mainly done through introduction of new ideas in the technology field. As such, technologies such as AcoBoost, direct injection of diesel fluid or gasoline, hybrid and six speed transmissions deliver the true power of choice to our customers everywhere (Ford annual report 2011).. 3.0 Internal Analysis 3.1 SWOT analysis 3.1.1 Strengths Ford is more financially stable than the Big Three carmakers due its timely acquisition of the capital Industry experts appreciate and respect the product line. In a recent survey, it came top in customer satisfaction Has a global brand recognition and worldwide market presence Great success in renegotiating labor contracts Appreciated as an American brand The US market has stabilized in the present years. 3.1.2 Weakness Poor profitability Little market penetration within India and China Highly competitive with very large fixed costs The company is selling durable goods during severe economic downturn in the recent history 3.1.3 Opportunities The company has recognized the significance of small and fuel-efficient automobiles and it is transitioning into the market The company vision ‘One Food’ has high chances to generate important margin increases for the smaller line of automobiles. The vision seems to be a rational strategy for the company to adopt looking at the changed role in the industry The company is said to be one of the most stable car manufacturers in America as it has not been forced to receive bailout money therefore, leading to a small increase in the market share Ford took advantage of Chrysler’s bankruptcy to steal market share for a short period 3.1.4 Threats Poor financial effects are straining the company’s capital As it is readjusting its production, the sales of the Ford trucks is declining rapidly and it may not be in a position to meet the shift in demand Bankruptcy of part suppliers such as Visteon may disrupt the supply chain Ford has weakness on the supply base 4.0 Porters 5 forces 4.1 Threat of new competition The treat of new competitors for Ford is very high. With companies such as Kia and Hyundai gaining market share extensively, major threat for the companies is on the increase and Ford may lose market share to the new companies 4.2 Threat of substitute products Substitute for products is low but it exists. With the increase of fuel costs and hard economy, people have cut their spending costs on vehicles and opted for public transport 4.3 Bargaining power of consumer The bargaining power of clients has gone up due to the availability of alternative and the economy crises. Clients are opting for reliable and affordable automobiles and they have a large alternative to choose from (Stonehouse et al 2004). 4.4 Bargaining power of the supply At the moment, the bargaining power of the supplier is very low for Ford. It is noted that the company control all its supplies and have made commitments and special arrangement with supplies gaining favors in its operations. In addition, it has led to cut cost for the company. 4.5 Competitive rivalry The intensity of competition for Ford is very high. The intense in rivalry is high due to the fact that most automobiles companies are working hard to boost their sales. As much as the starting cost is considerable high, most of these companies penetrating the market are established in different countries. 5.0 Resources Ford prides itself on the inputs into its production process. This consists of intangible and tangible resources. Bing an already established company, Ford has the capital equipment needed in the running of its operations, in addition, financial stability has been observed in the recent years. Its merge with other countries proves its expose resources. In addition, Ford has skills of individual employees and qualified management and talented managers. . 6.0 Capabilities Ford, in the present years has a capacity to integrate its resources to achieve desired objectives. Due to the availability of resources such as finance, strategic location and excellent management, it has been able to develop effective capabilities. For instance, Ford has been able to merge with other leading countries in different countries. This has been made possible due to the availability of finance that has facilitated establishment of plants (Defever 2006). 7.0 Competence As Ford has been able to identify its capabilities and resources, it has also identified its core competencies. Therefore, it has indeed achieved most of its strategic competitiveness. The availability of resource has played a major role in ensuring that the company meets its set objectives of growing globally and producing quality products while embracing change of technologies and environmental concerns. For instance, the plans to introduce all electric commercial vans and automobile due to advance in technology and environmental issues, promise to deliver high quality automobiles that are environmental friendly. 8.0 Yip’s Globalization Drivers 8.1 Market globalization needs Customers’ needs In the recent years clients are looking for new and personalized experience and stand out designs that do represent good value. Ford has had various initiatives to offer such products. Global channels and customers Ford has continued to offer standardized products in order to serve global customers. In addition it has continued to enhance its global pricing policies Transferable marketing The company has adopted brand names and advertising in its transfer marketing. This makes it easier to expand its participation in the markets. Lead countries Ford has continued to identify itself with the leading countries. For instance, its emerge with China, one of the fastest developing countries will ensure they do not miss out of the innovation in such countries. 8.2 Cost Globalization drivers Fast changing technology The cost of changing technology has indeed played a major role in the cost of the company products however, there are strategies being laid t harmonize the cost of the products 8.3 Government globalization drivers Favorable trade policies in the US and other countries have favored the company’s operations Introduction of technical standards in some countries has affected the extent to which the products should be standardized. The presence of government owned customers in potential markets has continued to limit the market penetration. 9.0 Culture differences There are various culture differences that arose as a result of the alliance between Ford and Chang’an Automobile Group in China. This constituted time, space concepts, perception, basic personality or national character, thinking, behavior, which is, norms, relationship and social groupings. Both the Americans and Chinese have different religions (Rugman 2005). As a result, differences in core values influenced business culture. Differences in corporate culture were also evidence, managers and employees from both companies, portrayed differences in behavior and lifestyle. This may have resulted to differences in decision making practices. Differences in culture due to the alliance have also influenced the preferences and behavior as customers and clients. However, it is important for Ford to integrate the Chinese culture in order sell successful in the foreign market. It needs to adapt the product so as to meet the needs of that particular market. Failure to do this may results to various kinds of marketing mistakes together with communication blunders (Financial Times 2000). 10.0 Cost management Being a process of controlling and planning the costs of doing business, Ford has customized the cost management plans. Indeed, when properly implemented, this strategy is likely translate into reduced costs for good production. In addition, it will increase the value delivered to the customer (Grant 2010). As automobile manufacture, effective cost management will lead to less spending on operations related to production and an increase in production of automobiles that fit the clients’ satisfaction and taste. Indeed, this strategy assists Ford to determine accurately whether the estimated expenses will assist in predicting the future. This is important given the current state of the economy. Indeed, in initiating further merge and acquisition, the management of Ford bearing cost management in their mind will assist in avoiding falling in pitfalls that are present. As such it plays a role as a strategic capability. 11.0 Value chain analysis Steps taken by Ford in value chain analysis Breaking down the market into three steps Assessing the potential for addition of value through differentiation or cost advantage Determining the strategies built focusing on various activities where there is sustaining of competitive advantage 11.1 Primary activities They are concerned with assembling and delivering of finished vehicles. This includes the company’s inbound logistics like supply of raw materials, operations, marketing and sales and services (Johnson & Washington 2008). 11. 2 Secondary activities These activities increase the efficiency and effectiveness of the company. Ford prides itself in having strategic plans of acquiring resources, recruiting, motivating and support systems such as planning, finance and quality control. 12.0 CAGE Analysis 12.1 Culture Different languages Different social norms Religion practices that are most similar The size of the product is affected by the distance 12.2 Administration Absence of political association in some countries such as Korea Lack of shared monetary Political hostility in some Far East and Africans countries 12.3 Geographical Differences in climates resulting to different models Weak transport and communication especially in countries that less developed 12.4 Economic Large differences in consumer incomes has led to the company standardizing its products Differences in quality and cost of financial and natural resources Infrastructure References Data from: Ford Motor Company 2008 Form 10K Defever F. (2006). Functional fragmentation and the location of multinational firms in the enlarged Europe. Regional Science and Urban Economics 36, 658-670 Dunning, J. (2009). Location and the multinational enterprise: A neglected factor? Journal of International Business Studies 40, 5-19. Financial Times (2000). Managing Global Business,Mastering Management Series. London: Pearson Ford 2008 Annual Report. Located at: http://www.ford.com/doc/2008_annual_report.pdf Ford 2011Annual report 2011 http://corporate.ford.com/doc/2011_annual_report.pdfv Grant, R.M. (2010) Contemporary Strategy Analysis: Text and Cases. 7th Edition. New York: John Wiley & Sons. Johnson, S. & Washington, M. (2008) Exploring Corporate Strategy 8th EditionLondon : Prentice Hall. OECD (2005). Internationalisation of R&D: Trends, issues and implications for S&T policies, Background Report, Forum on the Internationalisation of R&D, Brussels, March 29-30. Rugman, A. (2005). The Regional Multinationals. Cambridge: Cambridge University Press. Stonehouse, G., Campbell, D., Hamill, J. and Purdie, T. (2004) Global and Transnational Business: Strategy and Management.2nd Edition.Chichester: Wiley. Wolfe, D. (2009). Introduction: Embedded clusters in the global economy. European Planning Studies 17, 179-187. Read More